TSX falls as mining shares sink; index up for week

TORONTO (Reuters) - Canada’s main stock index fell on Friday, as materials and energy shares followed commodity prices lower, after Washington failed to reach a deal to prevent U.S. budget cuts.

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch

There have been widespread fears that the spending cuts will weaken the economy of the United States, which is Canada’s largest trading partner.

The materials sector, which includes some of the world’s biggest gold miners, was the largest weight on the index. Barrick Gold Corp (ABX.TO) dropped 3.4 percent to C$30.20 as bullion prices slumped. <GOL/>

The energy sector was the next biggest decliner as Brent crude prices fell to a six-week low, erasing all the gains so far this year. Financial stocks also fell, just a day after four of Canada’s top banks posted stronger-than-expected quarterly profits.

Royal Bank of Canada (RY.TO) slipped 0.4 percent to C$63.77 on Friday, while Toronto-Dominion Bank (TD.TO) slipped 0.2 percent to C$85.03. Both remain near record highs.

“A lot of the major banks, from a pure technical point of view, are right now at technical resistance,” said Keith Richards, a portfolio manager at ValueTrend Wealth Management. “Fundamentally, there are not a lot of bargains out there.”

Richards said the stock prices of Canadian banks typically slip in April or May, and said other factors - such as a high insider selling ratio and the average length of bull runs - pointed to a broad decline ahead.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended down 48.71 points, or 0.38 percent, at 12,773.12, with seven of the 10 main sectors in the red. It gained 0.56 percent for the week.

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The U.S. government stumbled toward the massive automatic spending cuts known as “sequestration,” after President Barack Obama and congressional leaders failed to find an alternative budget plan.

“This scares the market. People are nervous,” said Sal Masionis, a stockbroker at Brant Securities. The negotiations could drag on for weeks and be an overhang for the market, he added.

Investor sentiment was also dampened by weak economic data from Europe and the political stalemate in Italy. In Canada, data showed the country’s economy grew at a sluggish pace in the final quarter of 2012 after a similarly disappointing third quarter.

Atlantic Power Corp (ATP.TO), which generates and sells electric power to utility companies in Canada and the United States, fell almost 29 percent to C$7.30 after it slashed its dividend payout.

Magna International Inc (MG.TO) bucked the downward trend, rising 4 percent to C$57.02 after the auto-parts maker reported a 12.5 percent rise in profit on strong performance at its North American business.

Additional reporting by John Tilak; Editing by Jeffrey Hodgson and Leslie Adler